A Kansas City townhome development declared Chapter 11 bankruptcy last month, and the attorney representing the project’s Wichita developers the move could cost the developers heavily.

Holly Ridge Development LLC built Holly Ridge, more than 50 townhomes off of Arrowhead Trafficway in northern Kansas City, Mo., in 2012 and 2013.

Steve Robl, founder of Wichita homebuilder Robl Construction, owns half the company and managed the project, according to the bankruptcy filing in U.S. Bankruptcy Court in Kansas City, Kan. The other half is split equally between Wichita real estate investors Jeff Bennett and Chris Stevens.

Holly Ridge has assets of $5.6 million and liabilities of $8.1 million, according to the May 13 filing.

A dispute between the company and its general contractor, Homoly & Associates of Kansas City, Mo., led to the filing, according to the parties.

Homoly got a judgment against Holly Ridge in January, saying it was owed $351,000. David Eron, the Wichita attorney representing Holly Ridge, contended the amount is an unjustified cost overrun from the original contract.

What forced the bankruptcy, Eron said, is that in late April, Homoly sent letters to tenants in the development saying they were to make rent payments to Homoly.

The project generates enough cash flow to make the payments to its main financing and sole secured creditor, Intrust Bank, which is owed $5.9 million, according to Eron. But without the rent payments, the project’s financing no longer works, he said.

“The project would have been OK without the cost overruns, and the debtor (Holly Ridge LLC) wasn’t able to cover those overruns,” he said. “Then Homoly decided to get aggressive and started to raid the collateral (the rent).”

Eron said the goal now is to sell the project and use the proceeds to pay off the Intrust loan.

“We’ve been forced into this position, and we’ll look to offload and liquidate in an orderly fashion,” he said.

If there’s anything left for the unsecured creditors, that money will be split. If not, they get nothing. That includes $1.8 million owed to Robl Construction, according to the filing.

Homoly president Andrew Homoly said Wednesday that he had no comment on the bankruptcy.

But in a May 23 filing with the bankruptcy court, Homoly and Associates disputed the Holly Ridge developers’ account. Homoly contended that the developers have more than enough cash flow from the project to cover payments to Intrust.

At issue, Homoly said, is which of the unsecured creditors gets paid and how much. Other unsecured creditors include Holly Ridge’s lawyers and what Homoly called project “insiders”: DC Sharp General Contracting, Premier Property Management, Robl Construction and Steve Robl.

The developers, Homoly contended, could pay Homoly without going into bankruptcy and asked that the bankruptcy be dismissed.